How Blair's vision is blurred behind closed EU doors

By David Rennie in Brussels

12:01AM BST 17 Apr 2006

As Tony Blair and his officials told it, the EU budget deal brokered by Britain last December was a victory for the UK's vision of Europe.

The package was a "modest" £578 billion over seven years, Mr Blair insisted. It was a huge improvement on a budget deal dreamed up by Luxembourg and vetoed by Britain last June, that would have cost £584 billion.

This was a clever budget, British officials went on, offering increases in aid for our new friends from the former Communist bloc without costing significantly extra.

Mrs Gryb-auskaite, a former Lithuanian finance minister, is confident that the true cost of the budget will be more than £600 billion.

How did this happen? The answer is simple. Thanks to Europe's addiction to all-night summits, followed by closed-door haggling, it just happens this way.

Following arcane EU procedures, the budget deal - theoretically the "financial perspectives" for the years 2007-2013 - recently underwent one more bout of haggling, this one the most secretive of all.

The budget had to be approved in an "inter-institutional agreement" by senior representatives from the European Parliament, the European Commission, and diplomats from Austria, who inherited the rotating presidency of the EU from Britain days after the budget summit last December.

These negotiators emerged, blinking, some three weeks ago, to say they had added an extra two billion euros to the deal, or four billion, depending on which way you counted certain reserve accounts.

That was confusing enough, for the handful of EU voters still paying attention.

Now Mrs Grybauskaite says the actual deal is not two billion euros bigger, but nearly 40 billion euros more, or £24 billion.

"Let me explain. The financial perspective is composed of two parts: the financial framework and some instruments outside it," Mrs Grybauskaite told The Parliament Magazine.

The "financial framework" is what Mr Blair unveiled. It was worth 862.4 billion euros. After an extra two billion euros were tucked into it earlier this month, that became 864.4 billion euros.

So what are those "outside instruments"?

There is the European Development Fund, which the Commission says is worth 22.7 billion euros. It is basically a special aid budget for former European colonies.

There is the EU Solidarity Fund, an emergency fund to help member states and applicant nations who suffer major disasters, such as floods.

Under newly agreed rules, this fund can spend up to seven billion euros over seven years.

Then there is the Emergency Aid reserve - a fund for humanitarian emergencies, such as earthquakes, worth a total of 1.547 billion euros.

Next comes the "flexibility instrument", intended to redirect surpluses from other budgets to special areas of need, and limited to 200 million euros a year.

Finally, there is the Global-isation Adjustment Fund, to compensate workers who lose jobs to globalisation, again re-using unspent money. Commission documents say it will cost 3.5 billion euros over seven years.

These are meant to be maximum sums, and often involve recycling existing money.

So why is the Commission so sure the instruments will be "fully used", and will add to total spending? Because they know how Brussels works.

British officials said that if the Luxembourg deal had been accepted by Mr Blair in June much the same "instruments" would have been added to that. A British official said: "What we have now is a good deal for all."